The shares rose as much as 5 percent yesterday after the beleaguered Internet company said it would return all proceeds from a $1.1 billion patent sale to shareholders. The stock ended up 3.5 percent at $26.47 amid a broader downturn.
The stock is up more than 40 percent this year, fueled by the patent sale first announced in April. Armstrong said at the time that he planned to return a “significant portion” to shareholders.
The Internet firm’s chief executive is locked in a bitter feud with hedge fund Starboard Value, which is seeking board seats. Starboard has criticized Armstrong’s plan to expand AOL’s display ad business, saying it is losing more than $500 million a year, including $150 million for its hyperlocal Patch news sites alone.
Starboard officials declined to comment on Armstrong’s latest move, but a person close to the hedge fund said it will press ahead with its proxy fight at AOL’s June 14 shareholder meeting. Starboard won’t go away until Armstrong sells or shutters Patch, the person said.
First-quarter results showed that display-ad revenue fell 1 percent to $119 million — the first decline in more than a year.
“I think the Street isn’t happy with the display number,” said one large investor, who otherwise applauded the company’s earnings.
AOL reported profit of 22 cents a share, up 4 cents from the year-earlier period, due to lower operating costs. Overall revenue dropped 4 percent to $529 million but exceeded expectations.
Yesterday, Armstrong said AOL is on track to bring Patch’s “run rate to profitability” by the end of next year.